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2015 3rd International Conference on Information and Communication Technology (ICoICT) Identification of Customer Values in Telecommunication Service Industry A Case of Postpaid Cellular Customers in Indonesia Husni Amani1, Dini Turipanam Alamanda2, and Grisna Anggadwita3 Faculty of Industrial Engin...

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2015 3rd International Conference on Information and Communication Technology (ICoICT)

Identification of Customer Values in Telecommunication Service Industry A Case of Postpaid Cellular Customers in Indonesia Husni Amani1, Dini Turipanam Alamanda2, and Grisna Anggadwita3 Faculty of Industrial Engineering1, Faculty of Economic and Business2,3 Telkom University, Bandung, Indonesia [email protected], [email protected], [email protected] subscribers. Among those customers, 83% are served by the three mobile operators, i.e. PT.Telkomsel (121,5 million), PT.Indosat Tbk. (55,5 million) and PT.Excelcomindo Axiata Tbk. (42,3 million). In fact, the largest portion of total customers are prepaid ones (Sources: Mobile Operators, the Ministry of Communications, etc.; Data in 2012/Q3). However, this research focuses on postpaid customers by considering the little attention postpaid service got from mobile operators in the last decade, meaning that the postpaid service is arguably stagnant in terms of service development and the number of subscribers. Although the total postpaid subscribers are smaller than prepaid customers, but they generate higher Average Rate per User (ARPU) for mobile operators compared to ARPU from prepaid subscribers. Thus, every postpaid subscriber has a major contribution to the revenues of respective mobile service operator(s). In facts, the vast development of mobile telecommunication services supported by advances in smartphone technology has driven the behavior of postpaid subscribers in which many individuals use services from more than one mobile operator. The phenomenon has triggered several challenges for mobile operators. One of those problems is customer loyalty. The problem occurs particularly on post-paid customer due to the relatively low perceived customer values gained by postpaid customers. In other words, the values do not meet their expectations. Besides, the declining ARPU gained by mobile operators have decreased their profits. The declines hence encourage them to develop a marketing strategy that may create superior customer values. It is taken by understanding customers’ individual characteristics and improving marketing mix as well as customer relationship management (CRM). To elaborate issues covered by this study, a preliminary survey is conducted by using systematic sampling procedures on 50 customers of postpaid card who use in minimum one card from these following providers: Kartu Halo (issued by Telkomsel), Matrix (Indosat), and XL postpaid (Excelcomindo Axiata). Besides, four variables are taken in the preliminary study, i.e. customer values, marketing mix performance, CRM performance and customers’ characteristics. Apparently, the results indicate an inferior measurement on customer values particularly related to benefits and costs dimensions. In facts, cost dimensions are larger than benefits. Besides, the low satisfactions of postpaid customers influence the performance indicators of cellular network. Also, several dissatisfactions

Abstract— The vast development of mobile technologies has led to a competitive environment between the existing providers of telecommunication services in delivering their best offers to create customer values. Among their customers, postpaid subscribers have a distinguished position due to their exclusive characteristics which require special treatments from respective providers. This study aims to identify customer values created by telecommunications services provider, particularly for postpaid subscribers. A descriptive and causal analysis with further examination using Structural Equation Modeling is taken as the research methodology. There are 650 postpaid subscribers of 3 major telecommunications service providers in Indonesia, i.e. Telkomsel, Indosat and XL Axiata, asked to be the respondents. The results indicate that to create customer values particularly for postpaid mobile customers, companies should prioritize the development and performance improvement of customers’ relationship management, a deeper integration of customer characteristics, and an improved marketing mix. Looking at these results, this study offers a strategic step for telecommunication service providers in improving customer values as a means to increase customer loyalty to their services. Keywords— customer relationship management; customer values; telecommunication service providers; marketing mix

I.

INTRODUCTION

The massive development of mobile technologies has driven the creation of a very competitive mobile services market. ITU [12] has stated that “the role of mobile telecommunications services in the future will be greater in supporting the activities global communication.” During 20072011, the annual average growth of mobile phone subscribers in the world is about 14%, or equal to the growth of internet. However, the density of fixed-phone decrease steadily at ±2% per year. In 2011, the density of mobile phone subscribers is 86%. The rate is two times greater than internet users and five times than fixed phone [12]. Thus, this research needs to focus on mobile telecommunication services. Furthermore, Indonesia is the most populous country and the biggest economy in South-East Asia. These facts offer a great environment for the sustainable growth of its telecommunications industry. Particularly, there is a significant growth of mobile subscribers in the country. It then indicates the important role of mobile services for the community. In Indonesia, there are currently 7 operators of mobile telecommunications which serve 263.2 million

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Furthermore, a deeper understanding on the relationship between the characteristics and customer values has been conducted by Wong and Alison [34]. They suggest that “individual characteristics through the dimension of awareness about the price and time factor have a significant relationship to customer value.” Then, Sim et. al [25] have stated that “the individual characteristics, i.e. age, gender, innovativeness, and qualifications, have a significant relationship on perceived usefulness. Meanwhile, only individual innovations, age and gender which have a relationship on perceived ease of use.”

related to customer services occur, e.g. response to phone bill complaint, phone re-activation, and accuracy of usage records. In short, the low satisfaction of postpaid customers indicates the low benefits obtained by the customers. On the other hand, the survey results show the performance of the seven marketing mix dimensions. Apparently, five dimensions, i.e. product, price, people, physical infrastructures and processes, are stated as low, while place and promotion shows a high performance. These results are consistent with the existing studies by Depkominfo [6]; ITU Group [11]; and YLKI [36]. Meanwhile along with the shift of marketing activities from the transactional era towards a more relational era, the inferior customer values are also influenced by CRM run by mobile operators. Based on the results of preliminary survey, CRM performance is considerably low, particularly on the psychological benefits and gifts dimensions. The easements dimensions, on the other hand, show a high performance. Moreover, in the preliminary survey on customers’ individual characteristics respondents assess the dimensions of income, lifestyle and profession. Apparently, these dimensions have not been well-addressed by mobile operators in developing post-paid services. However, those respondents indicate that mobile operators have included good personality dimensions in developing the services. Then, based on these backgrounds this study particularly focuses on the influences of individual characteristics, marketing mix performance, and CRM performance on customer values in Indonesian mobile-cellular industry. II.

B.

Marketing-Mix

Marketing mix is a set of marketing tools taken by business in achieving its goal either to satisfy target customers or to influence their purchasing behavior on product/service (Kotler and Keller [14]; Azzadina et.al [3]). Marketing-mix consists of 7 factors (7P), i.e. product, price, place, promotion, people, process, and physical evidence. Ahonen et. Al [1] and Strouse [29] have explained that telecom operators have long practiced the bundling strategy. Strouse [29] has given an example of a fixed-telephone operator that provides special offers on local access, remote voice mail messaging, call forwarding, call waiting by adding a bonus on lower rate usage times compared to ones listed in the bill for individual services. Linking Marketing-Mix to CRM and Customer Values Reinartz et. al [24] have identified price and customer services as the value drivers for the performance of CRM. Next, a similar perspective has also been presented by Guenzi and Gabrielle [8]. They propose that companies which have a customer-oriented sales-force positively encourage the creation of superior customer values and increase their market share. Particularly, Sucherly [30] has conducted a research on Indonesian telecommunication services industry. He suggests that the “performance of marketing-mix strategies affects the value of telecommunications services.” He also proposes that “the superiority of promotional programs and service processed form a superior customer value.”

LITERATURE REVIEW

A.

Individual Characteristics Kotler et. al [16] have stated that the concept of marketing 3.0 refers to a marketing-driven value by which companies see customers as human beings with mind, heart and spirit. It indicates that the characteristics of individuals as an integral part of human beings have become an important concern in recent management sciences. Then, Kotler and Keller [17] have suggested that individual characteristics include age, stage in the life cycle, occupation, consumer income, personality, selfconcept, lifestyle and values.

C.

Customer Relationship Management (CRM) CRM is more commonly used in the context of technology solutions and has been described as “information-enabled relationship marketing” (Ryals and Payne [37] and Zablah et. al [15]). Kotler and Keller [17] have suggested that marketers should build a strong relationship with customers. Rahaman et. al [23] have examined the role of CRM in Bangladesh telecom operators by using five dimensions, i.e. thankful, responsiveness and relationship, appropriateness, caring and keep in touch (psychological benefits). Meanwhile, Lee et al. [18] have attempted to examine internet service providers of mobile CRM by using Suh and Park’s dimensions [26], i.e. contents differentiation, contact frequency, repetition contents (psychological benefits and easements). Then, Ghafari et al.’s work [7] on CRM at Iran Bank utilizes dimensions on information sharing, customer partnership, long-term relationship, joint problem-solving and technology-based CRM (psychological benefits and easements).

Linking Individual Characteristics to Marketing-Mix and CRM According to Koh et. al [13]; Alina [2]; and Wu et.al [35] have concluded that there are significant influences of individual characteristics on the marketing mix. Koh et. al [13] focuses on the services convergence of broadcasting and telecommunications by investigating dimensions on individual characteristics, i.e. income, gender, education and age, and marketing mix dimensions, i.e. information and communications technology (ICT) services. Knowledge on customers is obtained from customer profiles gathered from either database or data mining technique. Particularly, YLKI [36] have stated that there is a strong relationship between individual characteristics and CRM. Linking Individual Characteristics to Customer Values

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multistage random sampling by combining two or more of the sample design. This technique is often used in large-scale studies in which the population is widely dispersed geographically (Hansen, MH and WN Hurwitz, 1943). The first stage is used stratified random sampling is a sampling technique that divides the population into groups (stratum) are heterogeneous. Furthermore, cluster random sampling technique was used to select the area of each of these areas. Then, the process of primary data collection from respondents of postpaid customers conducted by systematic random sampling, the sampling process is random and sequentially with a certain interval. 650 respondents are taken as the samples from the population. Furthermore, sources of information in this study are divided into primary and secondary data. Primary data are gathered by using questionnaires asked to the respondents. Other primary data consist of information on mobile business development gathered through either direct interviews (faceto-face) or indirect ones, i.e. by phone, e-mail and SMS, with the managers of mobile operators. Secondary data, on the other hand, are gathered from literature on the developments of telecommunications and regulations at global level and ASEAN particularly Indonesia.

Linking CRM to Customer Values Focusing on the relationship between CRM performance and customer values, Verhoef [33] has attempted to examine the financial service provider customers. He suggests that membership in customer loyalty programs and direct mailings indicate a positive influence on changes in customer values. Loyalty program delivers values to customers by giving reward points after they make purchases. It gives a psychological sense for them (Hsee et. al [10]; Osselaer et. al [32]). Liu [20] has also proposed that at the time a customer swaps the point rewards, the subscriber receives economic benefits and psychology from the loyalty program. Then, Sirdeshmukh [28] have emphasized that starting a retentive relationship to customers has a functional importance in delivering a superior value to customers. D.

Customer Values Sucherly [31] advocates that the only company capable of creating a superior customer value will win the competition. Furthermore, Kotler and Keller [17] suggest that every business has a task to construct customer values to gain benefits. Chou [5] use three-dimensional perceptions of customer values, i.e. monetary, emotional, and conditional values. Petrick [22], on the other hand, attempts to examine cruise-ship services. He identifies the perceived values as quality, emotional response, monetary price, behavioral price and reputation. Then, Lee et. al [18] examine the creation of superior values by associating the performance of a company to the responsiveness to customer needs, the ability to develop creative solutions to the needs of the customer, the speed of action in innovation and market. Figure 1 below illustrates the framework taken in this study. Then, the study is supposed to test these following hypotheses: H1: µ1 > 5, Individual characteristics have been properly applied by mobile operators in their postpaid services H2: µ2 > 5, Marketing-mix performance is considerably good H3: µ3 > 5, CRM performance already is considerably good H4: µ4 > 5, Superior customer values Individual characteristics (X1), marketing mix H 5: performance (X2) and CRM performance (X3) simultaneously and partially affect customer values (Y). III.

METHODOLOGY

This study adopts descriptive and causal methods. The first one is used to describe the existing condition of individual characteristics, marketing-mix execution, CRM performance, and customer values. Then, the second method is taken to test the possible effects of individual characteristics, marketingmix performance, and CRM performance to the customer values of postpaid cellular subscribers in Indonesia.

Figure 1. Conceptual Model

B. Instrument and Data Analysis Questionnaire is used as the instruments in this study. It is divided into several sections. The first one asks the profile of the respondents to identify and map their background. The second section as them to choose statements that best suits their thinking on individual characteristics, marketing-mix, CRM performance, and customer values. Measurements of the questions in the questionnaire are six-point likert rating

A. Data and Samples Population taken in this study covers all postpaid subscribers of mobile operators (Telkomsel, Indosat, and XL Axiata) all over Indonesia. The sampling technique used is a

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scale. The use of a six-point likert scale to avoid a neutral opinion or prejudice. The respondents cannot choose a moderate value, the midpoint of the rating scale type because the respondents had to choose between one of two qualifiers scale be the answer. Furthermore, the results are analyzed by using Structural Equation Modeling (SEM), including Confirmatory Factor Analysis (CFA) as its major component. A 5% level of significance is set. The instrument is stated as valid and reliable if the t-test is bigger than t-table and Cronbach’s alpha is greater than 0.7. In particular, SEM is taken due to the existence of several interrelated-dependence relationships in the proposed model. Besides, SEM has an ability to analyze concepts and relationships being observed, including calculation of error in estimation process [9]. IV. A.

mobile operators are expected to properly develop postpaid and other mobile services according to the individual characteristics of postpaid subscribers. b) Marketing Mix The obtained t-value for this variable is -8.62. The value of t-test is smaller than t-table (-1.96), so Ho is accepted. It means that marketing-mix performance is considerably not good. The highest average value in this variable is the product dimension of (5.12), meaning that the performance of the products has been good, particularly on the diversity of cellular services, signal, sound clarity, SMS speed, and other interesting features. However, the speed and reliability of internet connection, mobile network coverage and product development are still considerably unfavorable. In this variable, the promotion dimension has the lowest average value (4.47), meaning that promotion-related performances are not good. Among the five indicators of promotion dimensions, only a publicity activity is considerably good, and the worst indicator is advertising (4.24), meaning that the advertisement performance is considerably not good. It is due to the fact that only a few numbers of mobile operators have advertised postpaid services. In general, they focus on pre-paid services. As the result, postpaid subscribers are difficult to obtain information about postpaid services. By comparing to the previous study [31], the low performance of postpaid service promotions can surely hamper the efforts to achieve a superior customer value. c) Customer Relationship Management (CRM) The obtained CRM’s t-value is -13.61. The value of t-test is smaller than t-table (-1.96), so Ho is accepted. It means that CRM performance is currently not in a good form. Apparently, the average values of all three CRM performance dimensions are below five, meaning that the performance of the psychological benefits, gifts and easements are not good. Among these dimensions, the performance related to psychological benefits has the highest value (4.87), yet it is considerably not good because it means that mobile operators have not properly preserved and maintained their relati...